Mentor Whiplash About Early Board Members

At TechStars, we talk often about “mentor whiplash” – the thing that happens when you get seemingly conflicting advice from multiple mentors. Talk to five mentors; get seven different opinions! This is normal, as there is no right or absolute answer in many cases, people have different perspectives and experiences, and they are responding to different inputs (based on their own context), even if the data they are presented with looks the same on the surface.

Yesterday, Steve Blank and I both put up articles on the WSJ Accelerators site. The question for the week was “When should you have a board of directors or a board of advisors?” My answer was Start Building Your Board Early. Steve’s was Don’t Give Away Your Board Seats. I just went back and read each of them. On the surface they seem to be opposite views. But upon reading them carefully, I think they are both right, and a great example of mentor whiplash.

For context, I have enormous respect for Steve and I learn a lot from him. We are on the UP Global board together but have never served on a for-profit board together. We both started out as entrepreneurs and have spent a lot of time participating in, learning about, and teaching how to create and scale startups. I’ve been on lots of boards – ranging from great to shitty; I expect Steve has as well. While we haven’t spent a lot of physical time together, all of our virtual time has been stimulating to me, even when we disagree (which is possibly unsettling but hopefully entertaining to those observing.) And while we are both very busy in our separate universes, my sense is they overlap nicely and probably converge in some galaxy far far away.

So – when you read Steve’s article and hear “Steve says don’t add a board member until after you raise a VC round” and then read my article and conclude “Brad says add a board member before you raise a VC round” it’s easy to say “wow – ok – that sort of – well – doesn’t really help – I guess I have to pick sides.” You can line up paragraphs and have an amusing “but Brad said, but Steve said” kind of thing. I considered making a Madlib out of this, but had too many other things to do this morning.

But if you go one level deeper, we are both saying “be careful with who you add to your board.” I’m taking a positive view – assuming that you are doing this – and adding someone you trust and has a philosophy of helping support the entrepreneur. From my perspective:

“… Early stage board of directors should be focused on being an extension of the team, helping the entrepreneurs get out of the gate, and get the business up and running. Often, entrepreneurs don’t build a board until they are forced to by their VCs when they raise their first financing round. This is dumb, as you are missing the opportunity to add at least one person to the team who — as a board member — can help you navigate the early process of building your company and raising that first round. In some cases, this can be transformative.”

Steve takes the opposite view – concerned that anyone who wants to be on an early stage board is resume padding, potentially a control freak, or the enemy of the founders.

“At the end of the day, your board is not your friend. You may like them and they might like you, but they have a fiduciary duty to the shareholders, not the founders. And they have a fiduciary responsibility to their own limited partners. That means the board is your boss, and they have an obligation to optimize results for the company. You may be the ex-employees one day if they think you’re holding the company back.”

Totally valid. And it reinforces the point we both are making, which Maynard Webb makes more clearly in his Accelerator post ‘Date’ Advisers, ‘Marry’ Board Members. When I reflect on my post, I didn’t state this very well. Anytime you add an outside board member, you should be reaching high and adding someone you think will really be helpful. You are not looking for a “boss” or someone who is going to hide behind their abstract fiduciary responsibilities to all shareholders (which they probably don’t actually understand) – you are looking for an early teammate who is going to help you win. Sure – there will be cases where they have to consider their fiduciary responsibilities, but their perspective should be that of helping support the entrepreneurs in whatever way the entrepreneurs need.

The power of a great entrepreneur is to collect a lot of data and make a decision based on their own point of view and conviction. You’ve got a lot of info – including some different perspectives from the WSJ Accelerators segment this week. That’s their goal – now I encourage you to read the articles carefully, think about what you want your board to be like, and take action on it.

Great post and also article on WSJ. To me the money quote of your article was “be willing to commit the time to helping you.” I think the most important characteristic a founder should be looking for in a board member is engagement and willingness to push back. I’ve joined boards mid life through early stage companies where the BOD was simply rubber stamping every CEO decision. I don’t that serves the company nor CEO well. As CEO, I’ve always most appreciated the BOD member who pushes back, challenges my assumptions and conclusions, and tells me I am wrong. To do that, it takes energy and time (never easy to argue with a founder), and engagement. They’ve got to be willing to talk through strategic questions, ask a lot of follow ups, and spend the time to really understand the business. The reality is for a startup you have lots of great hunches, and hopefully most of them are backed up by data, but it’s a startup, and it’s usually a brand new market, and who knows how it’s going to break. So the CEO should want people who by challenging him make their thinking, logic *better.* Now this activity shouldn’t happen in BOD meetings per se, but in all the work in between. If you watched @fredwilson ‘s interview on Pando – he talked about how him and @markpinc used to talk every day late at night – I remember those FreeLoader days – but that was massive engagement and time commitment by Fred.

Al

http://www.feld.com bfeld

Yup – real engagement takes real work. And a real board member will do the work. Fred is a spectacular example of this – not just with the Freeloader case, but every board I’ve ever worked with him on – and I expect every entrepreneur he’s ever worked with would say the same.

http://www.participate.com Alan Warms

I’ve seen lots of examples where the perfect on paper BOD member turns out to show up for meetings, take the 1 hour call prior to meeting, but doesn’t ultimately engage. Torture then because expectations weren’t set and now you’ve got to remove them.

http://www.feld.com bfeld

Even worse – when they show up and are uniformed, haven’t looked at any material, and then proceed to ask 371 questions of the CEO and management team that don’t have much to do with what is actually going on in the business. Happens ALL THE TIME – really painful.

http://pashagivesback.com/ William Mougayar

I think it depends on the maturity of the startup and its evolution. I read both sides, and in my opinion, what Steve Blank has said tended to apply to a more mature and evolved scenario (e.g. fiduciary responsibilities, etc.), whereas you’re taking the view of a rough start (most typical startups are that way) and where the advice you get early on can make a ton of difference.

I’ve seen close this “until they are forced to by their VCs when they raise’, and whether the founder admits or not, that’s their worst nightmare scenario. Having a board with 4 VCs and yourself is tough tough tough. They are there for financial reasons, not necessarily business reasons or experience fit, whereas you need business help more than anything.

http://www.feld.com bfeld

In addition, I think people typically overestimate the engagement of “advisors” at the early stages. Some are awesome, but many are passive, and it’s often hard to get the right kind of engagement. So – when you want this early help, figuring out how to incent / motivate it is important, and the board is a tool for that.

http://pashagivesback.com/ William Mougayar

Yes, I think it also depends on what kind of ‘skin in the game’ you give them. You will get very few altruistic advisors that a) know your domain, AND b) will give you valuable and pro-active advice.

Giving shares with a 4 year vesting period is cheap. I have also seen another startup that had assembled about 10 advisors that way just to display them on the website. They were getting very bad and conflicting advice and the results were showing. It’s like too many chefs in the kitchen that will spoil the sauce.

The right assembly of the right advisors is key. And how you incent them too, long/short term. I’ve been on both sides and with good and mediocre results either way.

http://pashagivesback.com/ William Mougayar

On the mentor whiplash thing, that may be a symptom of some accelerators having dozens of mentors just for show, then they rotate them to the startups, and you end-up with conflicting advice and a bad taste in the entrepreneur’s mouth.

I like to see better mentor-startup pairing and with skin in the game. When you’ve got skin in the game, things change. Not all “mentors” are mentor-ready. Some should be advisors and getting paid for it, if they deserve to.

http://www.feld.com bfeld

We’ve learned a lot about how to do this at TechStars. Month 1 is “mentors meet with everyone / whomever they want.” At the end of month 1, teams ask individuals to be lead mentors (three to five per company). It’s bidirectional – both sides have to agree and commit.

http://pashagivesback.com/ William Mougayar

That’s a good approach. There has to be some affinity and degree of fit both ways. thanks.

Startup New Zealand

I would totally agree with you about mentors having skin in the game. Against the odds we did awesomely well at Lightning Labs in New Zealand and an attribute was that a few of our mentors were investor in the accelerator fund since inception & some literally lived in-house with the teams during the programs.The in-house mentors (Dave Mosckovitz & Greg) were the first to put in 30 K unconditionally despite evident weaknesses in at Demo day and three million followed. A big day in the history of New Zealand and it comes down to mentors having skin in the game

Peter Mills

Hi Brad

I have lurked around your thoughts for some time but this article was right on the nugget for me. I co-run a young business in Leeds, UK called calls9. We are growing the business in a climate that does not really have the specialist start up labs but we took the decision early on to shape the “board” with informal mentorship in Finance and Marketing. Its really helped us and without spoiling relationships we have not moved quickly to formalise arrangements. Also we dont just “take” so with our mentors we see it very much as a two way relationship.

Great insight, thank you.

Pete
A FeldThoughts fan,
Leeds, UK

http://www.feld.com bfeld

Cool – good feedback. Congrats on your progress with doing this.

http://fishfishme.com/ Abdullah Alshalabi

I was holding my breath when I read the title, worrying that I might made a bad decision yesterday when I asked one of my friends (that happen to be a successful entrepreneur turned into an Angel investor) to be the first in our board after raising our first real round (hopefully soon). Anyway, your awesome posts always comes in a perfect timing for our startup

Jim Patterson

Good comments to a great article and topic. I have found that the best Board members fill one (or more) of three voids: a) resource acquisition (being on the Board improves attractiveness of the company to others); b) financial preparation for the next round of funding; and/or c) sales/ channel improvement (which could include partnerships). But, if the first round is angel-led, sometimes the investors can provide elements of these areas as well.

One question for the group – given the rapidly changing situations of start-ups, should the term of a Board member be different? One year, or even six months?

http://www.feld.com bfeld

I generally like one year terms with automatic renewal. That gives both the board member and the entrepreneurs an annual checkin and a graceful way to say “time to move on” if for some reason the relationship isn’t working, or the company has outgrown the board member.

http://www.justanentrepreneur.com Philip Sugar

“someone who is going to hide behind their abstract fiduciary responsibilities to all shareholders (which they probably don’t actually understand)”

Love that line. I also like Steve’s “And they have a fiduciary responsibility to their own limited partners”

I think the challenge is you have to find somebody completely independent. Many times a board member feels an allegiance to the preferred for lots of different reasons (they are their peers, they might want to serve on other boards, etc, etc.)

http://byJess.net/ Jess Bachman

Offtopic, whats the deal with people not commentating on these WSJ accelerator posts? Are they not promoted.. or is it just not the habit of online WSJ readers to comment. Just seems really odd.

http://www.feld.com bfeld

I agree. Total silence. Weird. I’ve encouraged them to try a real commenting system like Disqus.

http://byJess.net/ Jess Bachman

It’s not just comments, most posts have really low FB/twitter shares. I think the posts just have very low visibility in the WSJ universe.

http://twitter.com/andyidsinga andyidsinga

I’ve been thinking about advisors lately … seems there are at least a couple schools of thought on this too :

This post came at a timely moment in our TechStars Boulder cycle. David Cohen shared his “amnesty lunch” talk on fundraising today, and many of us are now thinking about how and who to attract as investors. This concept of finding an investor who really has “skin in the game” really resonated with me, and is certainly something I hope we can find for GoodApril. Thanks for sharing your thoughts both on WSJ, and your clarifications here.